Tivo strikes deal with Best Buy

Best Buy will ramp up its promotion of TiVo's DVR and services under a new agreement announced late Wednesday.

As part of the deal, San Jose-based TiVo also plans to provide its subscribers access to Best Buy's Napster music service and to the retailer's future digital offerings. Additionally, the companies are exploring adding TiVo software to Best Buy's store-brand televisions and developing a customized TiVo DVR for the retailer that would promote its products and services to TiVo subscribers.

The deal provides an opportunity for Best Buy to communicate with consumers after they leave its store, noted TiVo and Best Buy representatives. The agreement could also help TiVo communicate to customers visiting Best Buy's more than 1,000 U.S. stores that its DVRs can now do a lot more than record television, they said.

"We're both looking at this as a key opportunity to broaden how we relate to customers," said Tom Rogers, TiVo's CEO.

The agreement comes as both companies face significant challenges. TiVo has struggled for years to broaden the appeal of its DVRs by adding a slew of new features, such as the ability to download movies and TV shows directly from Amazon.com. But the company has had a tough time convincing consumers that they should pay $200 or more for a TiVo DVR when they can typically get one for no upfront cost from their cable or satellite TV provider.

Over its past two fiscal years, TiVo's subscriber base has fallen by 25 percent to 3.3 million. Last year, the company's revenue fell 8 percent from the year before.

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Best Buy has been performing much better financially and recently saw the demise of Circuit City, its chief stand-alone rival. But the decline in sales of CDs and DVDs has cut into a portion of Best Buy's revenue and the company has been looking to better establish itself in the emerging market for digitally distributed media.

As part of the deal, Best Buy plans to dedicate additional spending to advertise TiVo products in the near future, said Chris Homeister, Best Buy's senior vice president of entertainment. The company also plans to train its employees, to help them better tout TiVo products to customers, he said.

The companies aren't likely to debut Best Buy-customized TiVo DVRs or add Napster into TiVo's offerings until early next year, Rogers said. Adding TiVo's interface to Best Buy's Insignia or Dynex televisions is further out, Rogers said, declining to give a more specific time frame.

The companies did not give any financial details of the deal.

TiVo should benefit from the deal, analysts said. But they added that it is unlikely to solve the company's underlying problem: competing with set-top boxes that pay-TV providers offer their customers.

"People are always going to go with less functionality if they don't have to pay anything upfront for it," said Josh Martin, a senior analyst at Yankee Group, a technology research firm.

Promotion: Best Buy will increase its marketing and in-store promotion of TiVo"s DVRs. The retailer will also train sales employees to explain differences between TiVo"s DVRs and those offered by pay-TV providers.

Digital distribution: TiVo plans to add Napster and future Best Buy digital services to its slate of digital music and movie providers.

A Best Buy TiVo: The companies plan to develop a customized DVR to be sold at Best Buy stores. The customized box would promote the retailer"s services and products to users.

TiVo on TV: The companies are exploring building TiVo"s interface, search and other software into Best Buy"s Insignia and other store brand televisions.